In a recent article, SMSF Alliance principal David Busoli said while SMSF trustees understand that when the primary pensioner dies the pension will continue to a reversionary beneficiary, they may not be aware of some of the rules and requirements where this occurs.
For example, Mr Busoli said the primary pensioner’s minimum pension draw must still be met in the year of death.
Trustees should also be aware, he said, that although the transfer balance account report must be lodged as at the date of death, the reversionary beneficiary’s transfer balance account won’t be affected until a year later.
“This provides ample time to determine what TBA strategies are appropriate for the reversionary pensioner,” he said.
Mr Busoli also reminded SMSF professionals and trustees that any grandfathered Commonwealth Seniors Health Card income treatment relating to a pre-1 January 2015 pension, will be retained by the reversionary beneficiary.
Another commonly overlooked detail, he said, is that unlike the one year grace period for the transfer balance account purposes, the reversionary pension balance will be included in the reversionary beneficiary’s total super balance at the next 30 June rather than a year later.
“This could preclude the reversionary beneficiary from making further non concessional contributions in the next financial year so consideration should be given to the advisability of making NCCs for the reversionary beneficiary before the end of the year of death of the primary pensioner,” Mr Busoli cautioned.
